Nearly one in every three Xbox 360 consoles fail, according to retailer reports

By several metrics, the Xbox 360 is
the most successful console so far of this generation. Despite the startling
pace of the Wii, the Xbox 360 still has the most consoles sold worldwide and
the longest list of games and exclusives. For a gamer looking for online-enabled
high-definition gaming today, the Xbox 360 appears to satisfy those needs.

One often overlooked factor when
considering a console purchase is reliability, an area that is
apparently where the Xbox 360 falls short. Anecdotal evidence is heavily pointing
to Microsoft’s latest console as being significantly more prone to failure than
what consumers are accustomed to.

Microsoft has said before that its
Xbox 360 failure rate falls within three to five percent, what it believes to
be well within industry standards. Internet reports from Xbox 360 owners,
however, suggest that the failure rate is much higher than that.

In an effort to gain a more accurate
picture of Xbox 360 failure rate, DailyTech decided to poll retail
outlets that sell the Xbox 360 and with it the option to purchase an in-store
extended warranty. Out of all Xbox 360 extended warranties sold, we wanted to
know how many were claimed by consumers with defective consoles, thus giving us
a more accurate failures percentage.

After contacting several retailers from various regions in North America, the responses were
unanimous: the Xbox 360 is the least reliable gaming console in recent history.
Current EB Games or GameStop employees who offered information did so under
strict anonymity, as it is against company policy to reveal such information to
the public. Furthermore, our sources confirmed that EB Games revised its
Canadian warranty policies during early 2007 for consoles solely due to the
failure rate of the Xbox 360.

EB Games held conference calls for
its Canadian stores informing them of the new policy changes and revealing
alarming failure rates of the Xbox 360. “The real numbers were between 30 to 33
percent,” said former EB Games employee Matthieu G., adding that failure rate
was even greater for launch consoles. “We had 35 Xbox 360s at launch I know
more than half of them broke within the first six months (red lights or making
circles under the game discs). Two of them were dead on arrival.”

Interestingly, Microsoft has
acknowledged that the initial batch of Xbox 360 consoles made during the launch
window suffer from below average reliability. In response to an overwhelming
defect rate of launch consoles, Microsoft agreed to repair all machines manufactured in
2005 free of charge, and issue a refund for those who already paid for repairs
of launch units up until January 1, 2006.

The three flashing red lights – commonly
referred to in gaming communities as the “Red Ring of Death” – is a sign of an
Xbox 360 hardware failure. The sign is apparently common enough that Microsoft
has added an option to its 1-800-4MY-XBOX support line that names “three
flashing red lights” specifically.

As a result of the high failure rate
of the Xbox 360, EB Games corporate nearly doubled the prices of its one-year,
over-the-counter warranty. While the previous warranty would give a customer a
brand new console in exchange for the broken one, the new policy now states
that the customer will receive a refurbished console instead. The move was made
because it was becoming too costly for the retailer to give the customer a
brand-new machine, which still carries a store cost close to the MSRP. The
price increase and policy change wasn’t exclusive to only the Xbox 360,
however, as it also applies to all other Sony and Nintendo consoles sold.

The failure rate nearing a third of
all Xbox 360 consoles was found at other retailers too. A Best Buy customer
service department manager, who wished to remain unnamed, said that failure
rates for the console were “between a quarter to a third” of all units sold.

“We see a ton of [Xbox 360s] come
back all the time. We strongly push our customers to buy our service plans no
matter what they buy, but it is especially important for them with the Xbox
360,” said the manager. “It’s a lucky thing for us that Microsoft extended the
factory warranty to one year, because we were having a hell of a time dealing
with the launch units. Now we don’t have to deal with those broken [Xbox 360s]
until their second year, for those who have purchased the two year plans.”

In late 2006, Microsoft boosted the
warranty of all Xbox 360 consoles to
one year, up from 90-days previously. For gamers who are out of
warranty, however, a replacement or repair will cost Xbox 360 customers $140.

When compared against other systems,
the Xbox 360 is failing at higher rates than its current competitors and
predecessors. Former EB Games worker Matthieu G. said that the failure rates
for all other consoles were not high enough for the retailer to consider
revising its policies, and guesses that most other console systems
have a failure rate of less than one percent, including the PlayStation 3.
Another EB Games manager, when asked if the store warranty was worth it,
conceded that in the hundreds of Wii units sold at that location thus far, zero
have come back as defective.

Despite the overwhelming evidence
that the Xbox 360 is a relatively unreliable games machine, Microsoft officials
refuse to comment on its failure rate. Peter Moore, VP of Microsoft’s
entertainment division, said to the Mercury News, “I can’t comment
on failure rates, because it’s just not something – it’s a moving
target. What this consumer should worry about is the way that we’ve treated
him. Y’know, things break, and if we’ve treated him well and fixed his
problem, that’s something that we’re focused on right now. I’m not going to
comment on individual failure rates because I’m shipping in 36 countries and
it’s a complex business.”

Similar questions regarding the Xbox
360 hardware met with the man responsible for the design of the console, Todd
Holmdahl. He too sidestepped the issue with the Mercury News,
saying, “I would say we don’t have a high defect rate. The vast majority of
people are really excited about their product, and that we are targeting
profitability for next year.”

Asked differently about whether or
not the Xbox 360 falls into the ‘normal’ three to five percent return rate,
Holmdahl said, “We don’t disclose the actual number,” and “We don’t comment on
that.”

No piece of technology, no matter
how well designed, should be expected to completely free of failure. The key
metric is whether or not a product falls within industry standards of
acceptable failure rates – and from findings based off retailer-supported
warranty returns, the actual rate of failures could be six to ten times greater
than what Microsoft is letting on.

Regardless of what the actual
failure rate is, there is consumer perception that the Xbox 360 is a less
reliable machine than its competitors. That fact alone should encourage
Microsoft to do more than just avoid all comments on failures and only preach
on the wonderful experience of its consumer base.

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I thought the same way but ended up getting one. An Elite. So far, no problems. It's not noisy. Even after a few hours of play, the air coming out of it isn't unreasonably hot.

I had Gears of War freeze on me only once at the very beginning of the game. But that was an issue with the game because the music kept playing, the console still responded to the button on the controller being pressed to go back to the dashboard, and hitting pause to go back to the main menu. I went back to the main menu and started the game over (it was literally 20 seconds into the game).